Custom, Excise & Service Tax Tribunal
) Penshibao Wang Pvt. Ltd vs Commissioner Of ... on 4 March, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNALSOUTH ZONAL BENCH
CHENNAI
Appeal No.C/250/2011 & C/251/2011
[Arising out of Order-in-Original No.16308/2011dt.14.6.2011passed by the Commissioner of Customs (Seaport-Import), Chennai]
1) Penshibao Wang Pvt. Ltd.
2) Rajwant Singh, M.D. Appellant
Versus
Commissioner of Customs(Seaport-Import),
Chennai Respondent
Appearance:
Shri S. Sankaravadivelu, Advocate For the Appellant Ms. Indira Sisupal, AC (AR) For the Respondent CORAM :
Honble Shri R. Periasami, Technical Member Honble Shri P.K. Choudhary, Judicial Member Date of Hearing: 9.9.2015 Date of Pronouncement :4.3.2016 FINAL ORDER No.40937-40398/2016 Per R. Periasami Appellants filed appeals against the order of Commissioner of Customs (Seaport-Import), Chennai dt. 14.6.2011. Since both the appeals are arising out of a common order both are taken up together for disposal.
2. The brief facts of the case are that appellants imported certain goods and filed a live Bill of Entry No.331475 dt.12.10.2009 declaring it as "Plant Bio Fertilizer" (liquid) and classified it as "Plant Fertilizers" under CTH 31010099 claiming "Nil" CVD. Based on intelligence that the imported goods contained Pesticide 'Oxymatrine', the goods were detained, samples were drawn and tested. The test report dt. 27.11.2009 revealed the content of Oxymatrine of 0.41% and it was certified that declared content of 0.36% to be treated as "Pesticides" rather than fertilizer. Detailed investigations were carried out and statements were recorded. Accordingly, show cause notice dt.6.5.2010 was issued to the appellant proposing rejection of classification of goods as"Plant Bio Fertilizer", and for reclassifying the goods as "Pesticides" under CTH 38089910. The notice also demanded differential duty on the past consignments covering 16 Bills of Entry. SCN proposed for confiscation under Section 111 (d), (m) and (o) of Customs Act and also proposed for penalty under Section 112(a)/114A/14AA both on the appellant as well as on Shri Rajwant Singh, Managing Director of the appellant-company. The adjudicating authority after following the principles of natural justice in the impugned order rejected the classification of the imported goods under CTH 31010099 and reclassified the goods under CTH 38089910 and ordered for confiscation of 16,000 Kgs of seized goods covered under live Bill of Entry No.331475 dt. 12.10.2009 and allowed for re-export of goods imported under B/E No.331475 dt.12.10.2009 on payment of a redemption fine of Rs.5 lakhs. He also imposed penalty of Rs.2,50,000/- each under section 112 (a) of Customs Act on the appellant and on Shri Rajwant Singh, Managing Director.
3. The adjudicating authority also ordered confiscation of 1,32,800 kgs of goods imported vide 16 past Bills of Entry and confirmed the differential duty of Rs.70,45,440/- under Section 28 (1) along with interest under Section 28 (AB) of the Customs Act. He also imposed equivalent penalty both on the appellant as well as on the co-noticee under Section 114A/114AA of the Customs Act. Hence the present appeals filed by appellants.
4. Heard both sides. Ld. Advocate appearing for both the appellants drew our attention to page 59 of paper book showing list of total imports made by the appellants covering 17 Bills of Entry including live bill of entry No.331475 dt.12.10.09 for the period 10.9.2007 to 12.10.2009. He submits that the goods were declared as "Plant Extract Bio-Fertilizer" as per the test analysis certificate issued by the supplier and drew our attention to copy of test certificates enclosed at page 131, 143, 146 and 158 of the paper book. The analysis certificates were issued by M/s. Beijing Multigrass Formulation Co. Ltd., China. As per the analysis certificate, the imported material is mixture of compounds and minerals, Nitrogen, Phosphorous and percentage of each compounds have been indicated and it clearly showed the content of the item Matrine (Oxymatrine) as 0.36% (Min.). These certificates were duly submitted along with each Bill of Entry filed and was assessed by the Customs. Samples were drawn by the customs and sent for test to Customs Laboratory. He referred to test report dt. 31.3.2005 enclosed at page 160 of the paper book issued by Chemical Examiner, CRCL in respect of Bill of Entry No.702556 dt. 21.10.2004 and it confirmed that product under reference contained hydrogenous organic compound and inorganic compounds containing Phosphorous, Potassium etc. and he opined that samples under reference may find use as a fertilizer. He therefore submits that in respect of past 16 Bills of Entry the goods were tested by Customs and also accompanied the analysis certificates of the supplier before clearance. Therefore, there is no misdeclaration or any suppression of facts. Appellant had no intention to misdeclare the content of the imported goods. As per the analysis report accompanied, it was clearly shown Oxymatrine content of 0.36%.
5. He further submits that regarding goods covered under live Bill of Entry No.331475 dt.12.10.2009 where the samples were drawn again in Nov 2009 and sent for testing to private lab and got tested. As per the test report dt. 27.11.2009 (available at page 159 of PB) issued by M/s. Inspectorate Griffith India Pvt.Ltd. the sample was found to contain Oxymatrine content of 0.41%. In addition to that, sample also contained Nitrogen, Phosphorous content also conforms the composition list of the exporter. The test report opined that the declared content of 0.36% of Oxymatrine is to be treated as "Pesticides rather than Fertilizer". For the live consignment, he admits the classification of the goods as Pesticides under chapter 38 as per Honble Supreme Court decision in the case of UOI Vs Pesticides Mfg. & Formulators Association of India - 2002 (146) ELT 19 (SC). He submits that they are only contesting the demand confirmed for the past clearance and the live Bill of Entry dt.12.10.09. He drew our attention to Note (6) of Chapter 31 wherein it is explained that for the purpose of Heading 31.05, the term other fertilisers applies only to products of a kind used as fertilizers and containing, as an essential constituent, at least one of the fertilising elements, nitrogen, phosphorous or potassium. For the past 16 consignments the demand is hit by limitation as the proviso to Section 28 cannot be invoked as they have declared the goods in the Bill of Entries and enclosed the analysis certificates with each consignment and the reports indicated the presence of Oxymatrine content of 0.36% in addition to Nitrogen, Phosphorous and Pottasium and other minerals. The Chemical Examiner test report confirmed the goods imported as "Bio-fertiliser". The department accepted the Customs test reports and allowed clearance. Therefore, the assessment holds good for past clearances. Merely based on the opinion given by private lab on the live goods it cannot be construed that appellants have misdeclared the goods. He also submits a copy of Wikipedia, the free Encyclopaedia on the Plant "Sophora Flavescens" and submits that it is commonly used as plant extract for treatment of viral hepatitis, enteritis, cancer, viral myocarditis, gastrointestinal haemorrhage and skin diseases. When they have correctly declared the description as per the invoice, test analysis certificate and it is the prerogative of the Customs to correctly assess and classify the goods and Customs correctly asessed past goods as per CRCL test reports. Each and every bill of entry accompanied analysis certificate clearly mentioning the content of Oxymatrine 0.36% and appellant cannot be faulted and alleged misdeclaration.
6. He drew our attention to Section 38 of the Pesticides Act where it exempts if the goods are used other than Pesticides. He submits that since the present goods were used as "Bio-Fertilizer" they have not been sold or used as pesticides, they are exempted from licensing and other regulations of Insecticides Act and there is no violation of the said Act. He pleaded that duty demanded for the past consignments is clearly hit by limitation and he relied on the following case laws :-
(i) Northern Plastic Ltd. Vs CC & CCE 1998(101)ELT549 (SC)
(ii) Sab Nife Power Systems Ltd. Vs CC Chennai 2000 (124) ELT 1080 (Tri.)
(iii) Commissioner Vs Sab Nife Power Systems Ltd.
2002 (141) ELT A95 (SC)
(iv) IntradeImpex Private Ltd. Vs CC Indore 2001 (129) ELT 737 (Tri.-Del.) He further submits that section 111 (d) cannot be invoked for live Bill of Entry where the appellants have not cleared the goods as pesticides but already paid the customs duty of Rs.9,74,961/- as Bio-fertiliser and abandoned the goods and they have not re-exported the goods as ordered by the Commissioner. Therefore, redemption fine and penalty are not imposable. He submits that department relying on e-mail dt. 6.11.2009 for alleged misdeclaration is not correct as the e-mail which they have sent on 6.11.09 is only to inform the supplier about the test results of the live B/E and appraising the supplier of the departments stand for classifying the goods as pesticides under Chapter 38. He also submits that appellants are not liable for penalty under Section 114A and 114AA penalty for the past consignments. Notwithstanding, he admits that if at all penalty is imposable, it is only in respect of live consignments covered under Bill of Entry No.331475 dt. 12.10.2009, section 112 penalty can be imposed. For the live Bill of Entry, they have already paid differential duty of Rs.9,74,261/- as Bio-Fertilizer and already predeposited Rs.15 lakhs as per the Tribunals stay order
7. On the other hand, Ld. A.R reiterated the investigation proceedings brought out in the SCN and the OIO and submits that Shri Rajwant Singh, Managing Partner had tie up with foreign supplier for setting up of a joint venture and floated this company. She drew our attention to page 7 of OIO at para 15 to 17 on the modus operandi and the concept of import of goods clandestinely which is a pesticide but declared in the Bill of Entry as Bio-Fertilizer. The goods are pesticide covered under Insecticides Act which required a specific licence for import and manufacture. She also drew our attention to website details which was listed at para 15 of OIO wherein the companys own website contained various products marketed by them and it was indicated that they were manufacturing and selling Insecticides such as BIO-303 and DAMAN-47 which has been mentioned as Insecticide containing Oxymatrine and submits that as per their own website, Oxymatrine is extract from the plant "Sophora Flavescens". It is poisonous which is used as Insecticide. She submits that Shri Rajwant Singh in his statement claimed that he has disowned the website details. She also referred to para 13 of OIO where the statement of CHA clearly admitted that he signed the documents and also filed declaration to the Customs on behalf of importer. She also relied Rajwant Singh's statement at para-16. She also submits that Section 38 of Insecticides Act is not applicable to the appellant as they have clearly misdeclared the goods as Bio-Fertilizers. Therefore, penalty imposed under Section 114A and 114AA is sustainable. She also relied e-mail correspondence dt.11.9.2006 and 6.11.2008 at para-24 of OIO which was discussed at para-28.
8. We have carefully considered the submissions of both sides and examined the records. The issue before us is (1) whether the classification of the imported goods should be under Chapter Heading 31010099 claimed by the importers as "Plant Bio-Fertilizer" or under Chapter Heading 38089910 of CTH as claimed by the Revenue as "Pesticides".
(2) Whether the 1600 Kgs. of imported goods declared as 'plant bio fertilizer' imported vide live Bill of Entry No.331475/12-10-09 (valued at Rs.67,47,325/-) and 1,34,800 Kgs. of the imported goods imported vide 16 past Bills of Entry (totally valued at Rs.6,67,98,818/-) are liable to confiscation under Sections 111 (d), (m) and (o) of the Customs Act, 1962 read with Section 3 (3) of the Foreign Trade (Development and Regulation) Act 1992 and Section 17 of the Insecticides Act, 1968 (3) Whether duty amounting to Rs.70,96,885/- is liable to be recovered from M/s.Penshibao Wong, Bangalore under proviso to Section 28 (1) of the Customs Act, 1962, along with interest payable under Section 28 (AB) on the imported goods cleared by them under the aforesaid 16 past Bills of Entry by invoking the larger period of limitation is hit by limitation and whether penalty imposed under Section 114/114A is sustainable.
9. We propose to discuss the live consignment covered under B/E No.331475 dt. 12.10.2009.
(i) The facts as set out in the preceding paragraphs shows that the appellant imported 16000 Kgs. of goods declared as Bio-Fertilizer under said Bill of Entry and the samples were drawn and sent for testing to private laboratory. As per test report the goods were found to contain Oxymatrine 0.41 % and in addition, it also contained Nitrogen and Phosphorous and other minerals and conformed the certificate of composition list of the supplier. The appellant classified the goods under Chapter Heading 31010099 of the CTH whereas the Revenue reclassified the goods under CTH 38089910 as other pesticides and the adjudicating authority confiscated the goods 16000 Kgs. and also allowed for re-export of goods on payment of Redemption Fine of Rs.5 lakhs and also imposed Rs.2.50 lakhs penalty each on the importer and the Managing Partner, Shri Rajwant Singh under Section 112 (a) of the Customs Act.
(ii) The appellant fairly admitted the classification of the goods under Chapter Heading 38089910 of the CTH covered under the above live Bill of Entry. On perusal of the Test Report, dt. 27.11.2000 enclosed at page 159, issued by a private laboratory i.e. M/s.Inspectorate Griffith India Pvt. Ltd., Chennai, we find that the results of the test indicates various compounds, Nitrogen, Phosphorous, Silicon etc., and Oxymatrine (detd. as Alkaloid content) at 0.41%. The foot note of the report also states that the result of parameters tested above complies with the given composition list of the exporter (supplier). Further it states that according to the agency, the goods with declared content of 0.36% Oxymatrine to be treated as pesticides rather than Fertilizer.
(iii) Based on the test reports, the adjudicating authority classified the goods under Chapter 38089910 of CTH. The appellants have not contested the classification of the goods covered in the live consignment. We find that the import of Pesticides are prohibited under Section 17 (1) (a) of Insecticides Act, 1968 and the appellants have not obtained registration from the Central Insecticide Board (CIB) for the import of Pesticides, we hold that the confiscation of the goods ordered by the adjudicating authority under Section 111 (d) of Customs Act is liable to be upheld.
(iv) We also find that the adjudicating authority considered the appellants request and allowed for re-export of the goods on imposition of RF of Rs.5 lakhs. We uphold the same. However, we find that the goods are not re-exported and they have abandoned the goods and the goods are still with Customs custody.
(v) As regards imposition of penalty, the adjudicating authority imposed penalty of Rs.2.50 lakhs each on appellant and Shri Rajwant Singh, Managing Director under Section 112 (a) of Customs Act. Considering the value of goods confiscated is Rs.67,47,325/-, the adjudicating authority has imposed lesser penalty. We do not see any justification in waiver or reduction of penalty. Therefore, we uphold the penalty of Rs.2,50,000/-each (Rupees two lakhs fifty thousand only) imposed on the importer and its Managing Partner, Shri Rajwant Singh. Impugned order to this extent is upheld.
10. We now proceed to discuss the demand confirmed on the past clearances under 16 Bills of Entries which is contested by the appellant both on merits and on limitation. On perusal of records, copy of Bill of Entry No.268877 dt. 23.7.2009 annexed at page 144 of the paper book and the corresponding invoice No.00241428 dt. 1.6.2009 and the composition list at page 142 & 143, it is noticed that the appellants have declared their goods in the Bill of Entry as Plant Bio-Fertilizer as per the invoice, classified the goods under Chapter Heading 31010099 of the CTH, the Department assessed the Bill of Entry and the samples were drawn and tested by CRCL and as per Test Report the goods were allowed clearance as Bio-Fertilizer. The CRCL Test report dt. 31.3.2005 (annexed at page 160) signed by the Chemical Examiner, CRCL, Custom House in respect of the sample covered under B/E No. 702556 dt. 21.10.2004 is reproduced as under :-
BE No.702556/21.10.04 (Lab No.1454/MCH/1711.04) As per the technical literature enclosed the product Sophora Plant Extract (Biofertilizer) is a biologically derived liquid bio extract organic fertilizer for drip irrigation, soil drenching application on crops. It contains sophora flavescens and naturally available hydrolised protein complexes derived from natural source of plant and vegetable origin. This improves yields and quality of farm produce in different crops.
The sample on analysis was found to contain hitrogenous organic compound and inorganic compounds containing phosphorus, potassium etc. Based on the above findings and the information given in the technical literature enclosed, he sample under reference may find use as a fertilizer/Actual use may also be ascertained.
From the above test report, it is evident that the imported goods contained Heterogeneous compounds and Inorganic compounds containing phosphorus and potassium and the Chemical Examiner categorically clarified that sample under reference may find use as a fertilizer. On perusal of the composition report, issued by the supplier along with the imported goods, we find that the composition of the imported goods is a mixture containing matrine (oxymatrine) 0.36%, Nitrogen 2369.9 5g/g, Phosphorous 1389.3 5g/g and Potassium 18491 5g/g, Magnesium 858 5g/g , Manganese 10.2 5g/g. It also contains Iron, Zinc, Copper, Calcium, Silicon and other minerals. Based on the above CRCL report of Customs that the goods satisfied and were rightly classified as Plant Bio-Fertilizer. When the classification and assessment of imported goods under Chapter Heading 31010099 as "Plant Bio-Fertilizer" was done based on the Test Reports and goods were cleared during the relevant period, the question of alleging misdeclaration or suppression of facts by the appellant does not arise. Further, the revenue has not adduced any evidence that the said goods imported as "Bio-Fertilizer" were sold or marketed as "Pesticides". No farmer or cultivator will ever buy the product which is described as "Bio-Fertilizer" but use it for "Pesticides" purpose. Therefore, in the absence of any evidence contrary to the declared goods cleared in the past by the appellants, it cannot be said that the appellants have suppressed the facts or misdeclared the goods merely based on the report of live consignment. Therefore, we are of the considered view that the charge of misdeclaration/suppression with intention to evade customs duty is not sustainable.
11. Further, we find that the entire proceedings initiated by the Customs for the past clearances which is purely based on the test report of the live consignment covered under B/E No.331475 dt. 12.10.2009. We find that the adjudicating authority has considered only the remarks given in the said test report for the live consignment. The Customs Laboratory test reports for the past consignments confirming the goods as Bio-Fertilizer is valid for the said imports and in the absence of any contrary report evidence against the CRCL report, the adjudicating authoritys finding that the past consignments were only Pesticides not Fertilizers is beyond acceptance and not in conformity with the law.
12. In this regard, we find from the technical literature of Wikipedia Encyclopaedia in respect of source material Plant Sophora Flavescens, the origin, medicinal properties and the usage has been described. The extract of the root contains various Alkaloids including Matrine and its oxide, matrine oxide. The product has been used in pharmacology for treatment of cancer, cardiac disorders and as an anti-inflammatory and anti-oxidant, it is used for inflammatory disorders such as rheumatoid arthiritis, in addition to other uses. The above literature confirms that the plant extract (Oxymatrine) has various uses. As per the composition and the test report of past consignments, it confirms that in addition to Oxymatrine, the mixture do contain Nitrogen, Phosphorous and Potassium which are essential elements to be classified as 'Other Fertilizers'. The appellants have declared the goods as Bio-Fertilizer as per the invoice and composition/analysis report of the supplier which is confirmed by the CRCL test report. There is no misdeclaration or suppression of facts and the demand is hit by limitation. In this regard, we rely on the Honble Supreme Court decision in the case of Sab Nife Power Systems Ltd. 2002 (141) ELT A95 (SC). The relevant paragraph of the Honble Supreme Court decision in Sab Nife Power Systems are reproduced as under :-
Demand (Customs) Limitation Charge of misdeclaration or suppression with intent to evade duty does not survive merely because the exemption claimed by assessee found to be inadmissible by Customs later on or the allegation the requisite Certificate was forged one Extended period not invocable The Supreme Court Bench comprising Honble Mr. Justice Syed Shah Mohammed Quadri and Honble Mr. Justice S.N. Phukan on 14-9-2001 dismissed on merits as well as limitation the Civil Appeal Nos. of 2001 (D. No. 16240) filed by Commissioner of Customs, Chennai against the CEGAT Order Nos. 3148-3157/99, dated 20-12-1999 and reported in [2000 (124) E.L.T. 1080 (Tribunal)] (Sab Nife Power Systems Ltd. v. Commissioner). While dismissing the appeals the Supreme Court passed the following order :-
No sufficient cause is shown to condone the delay of 334 days in filing the Civil Appeals. That apart, there is no merit in the Civil Appeals. The interlocutory Applications and the Civil Appeals are dismissed. The Appellate Tribunal in its impugned order on the issue of invocation of extended period, relying on Supreme Court decision in the case of Northern Plastic Ltd. [1998 (101) E.L.T. 549 (S.C.)], had held that the impugned goods were clearly, correctly and fully declared in the Bill of Entry and accompanying certificate by the assessee. Availability of exemption with respect of the goods declared was a belief held in the mind of importer. Further the other part of the said certificate that the imported items were for supply for Defence purposes also was found to be correct on facts as batteries manufactured from the imported materials were supplied to M/s. HAL. There was no misdeclaration or suppression with intent to evade duty merely because the exemption claimed was found to be inadmissible by Customs later or for the allegation that the said certificate was a forged one. Customs authorities should have checked its admissibility in time. As such the extended period was not invocable and the demand issued after 3 years was held to be time-barred.
The ratio of the above Supreme Court judgement is squarely applicable to the present case as the goods imported in the past were correctly and fully declared in the Bill of Entries as per the invoice and as per the analysis certificate of the supplier which is confirmed by the CRCL test report and there is no misdeclaration or suppression with intent to evade duty. Accordingly, the re-classification of the goods ordered by the adjudicating authority for the past 16 consignments and the confirmation of demand of differential duty of Rs.70,45,440/- under Section 28 of the Customs Act is not sustainable and liable to be set aside. Consequently, the imposition of equivalent penalty under Section 114/114AA of the Act on the appellant as well as on the Managing Director is also liable to be set aside.
13. In view of the foregoing discussions, we order that
(a) the impugned order of confiscation and imposition of RF in respect of goods of quantity of 16,000 kgs. imported under Bill of Entry No.331475 dt. 12.10.2009 is upheld.
(b) the penalty imposed under Section 112 (a) of the Customs Act on the appellant as well as on the Managing Partner, Shri Rajwant Singh is upheld.
(c) the order of confiscation and confirmation of differential duty of Rs.70,45,440/- on the imported goods already cleared vide 16 past consignments is set aside on merits and on limitation. Consequently, the equivalent penalty imposed under Section 114/114AA of the Customs Act is also set aside with consequential relief.
Appeal is partly allowed in the above terms.
(Proceedings dictated on 9.9.2015 and order
pronounced in open court on 04.03.2016)
(P.K. CHOUDHARY) (R. PERIASAMI)
JUDICIAL MEMBER TECHNICAL MEMBER
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